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BitMEX settles with CFTC, FinCEN for $100 million, but criminal cases against former execs continue

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On August 10, the Commodity Futures Trading Commission and Financial Crimes Enforcement Network settled their civil lawsuits against crypto exchange BitMEX and its holding company. The firm will pay regulators $100 million.

The consent order said of the crypto exchange's offenses:

"Among other things, BitMEX failed to implement a customer identification program (“CIP”), including know-your-customer (“KYC”) procedures, that would enable it to identify U.S. persons using the BitMEX platform—or determine the true identity of the vast majority of its customers, whether from the U.S. or elsewhere."

Per the consent order, BitMEX may not offer derivatives products in the United States or operate a swaps facility without first scoring approval from the CFTC.

The settling defendants, as named in the consent order, are HDR Global Trading Limited, 100x Holdings Limited, ABS Global Trading Limited, Shine Effort Inc Limited, and HDR Global Servies (Bermuda) Limited, "all doing business as 'BitMEX'."

In his blog on the announcement, current CEO Alex Höptner said that "crypto is becoming more responsible. Comprehensive user verification, compliance, and robust anti-money laundering controls are a must-have."

"BitMEX represents it has engaged in remedial measures, including the development of an AML program and user verification program," the CFTC consent order stated.

U.S. regulators initially announced lawsuits against BitMEX and its executive team back in October. These charges included the civil case that today's injunction ends, as well as criminal charges from the Department of Justice against the founding team of Arthur Hayes, Ben Delo and Samuel Reed. Those cases are still ongoing.

“BitMEX’s rapid growth into one of the largest futures commission merchants offering convertible virtual currency derivatives without a commensurate anti-money laundering program put the U.S. financial system at meaningful risk,” FinCEN’s Deputy Director AnnaLou Tirol said in a statement.  “It is critical that platforms build in financial integrity from the start, so that financial innovation and opportunity are protected from vulnerabilities and exploitation.”

A spokesperson for the BitMEX co-founders told The Block that they "look forward to defending themselves in court."

“Today, two agencies of the U.S. government announced civil settlements, which were on a no-admit-no-deny basis, with companies associated with the BitMEX trading platform. BitMEX co-founders Arthur Hayes, Ben Delo and Sam Reed were not parties to these settlements. As their defense will show, from the company’s earliest days, the co-founders sought to comply with applicable law as it developed over time. The actions against Arthur, Ben, and Sam by the U.S. authorities are unfounded and represent an unwarranted overreach. The co-founders look forward to defending themselves in court.”

The CFTC consent order is embedded below:

   BitMEX Consent Order by Mike McSweeney on Scribd

Correction: This report has been amended to reflect that the CFTC order does not permanently bar BitMEX from offering services in the US; rather it must receive approval before doing so.

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